Ottawa Mayor Jim Watson expresses disappointment with the news that internal strife between the main partners of the consortium tapped to redevelop LeBreton Flats has set back the major city-building project.

Trinity Development Group Inc. and its executive chairman John Ruddy say the lawsuit launched against them by their partner in the LeBreton Flats redevelopment project is an “abuse of process” and are counter-suing Ottawa Senators owner Eugene Melnyk and his company Capital Sports Management Inc. (CSMI) for $1 billion.

CSMI launched its lawsuit in November, alleging its joint venture with Trinity to revitalize the vacant federal land west of Parliament Hill and build an NHL arena downtown “failed” because Trinity created “an egregious conflict of interest” by pursuing another large development across the road at 900 Albert St.

Melnyk’s lawsuit seeks $700 million in damages. This “strategic attack on Trinity,” the developer alleged in its statement of defence and counterclaim, comes down to CSMI’s “strained financial circumstances.”

“(CSMI) has admitted lacking the cash to contribute to its Joint Venture obligations,” claims the statement, filed in Ontario Superior Court on Monday. “CSMI’s and Melnyk’s true aim is to have the City of Ottawa or Trinity fund and build the $500 million Event Centre for the Ottawa Senators hockey team, with the Senators getting 30 years’ free rent.”

Trinity alleges Melynk’s suit is “meritless” and there are “zero grounds in fact or law” for suing Ruddy, its founder, personally.

None of the allegations contained in the statements of claim, defence and counterclaim in this legal dispute has been tested in court.

The LeBreton Flats project is stalled until near the end of January, when the board of directors of the National Capital Commission (NCC) — which owns the land in question — will meet and decide how to proceed with the redevelopment of the 53-acre property, which has now been in the works for years.

Ruddy and Melnyk joined forces under the name RendezVous LeBreton to submit a bid for the LeBreton Flats project. They were tapped as the preferred proponent in 2016 and then signed an agreement in principle with the NCC in early 2018.

The centrepiece of RendezVous LeBreton’s $4-billion redevelopment proposal was a new home for the Ottawa Senators – an 18,000-seat NHL hockey arena – accompanied by 4,000 new housing units across five mixed-use neighbourhoods, a number of public spaces and a French-language public school.

Under the partnership, CSMI would take the lead in the “financing, leasing, and overall design” of the hockey arena. But Trinity’s statement of defence alleges CSMI is “not financially sound” and Melnyk didn’t want to pay for the arena.

Trinity’s statement of defence alleges CSMI “has neglected or evaded its financial obligations” over the course of the project, including its share of the fees for an environmental study of the LeBreton site and for city planning applications, which Trinity had to cover in the end, the developer claims.

This past October, at a meeting with Ottawa Mayor Jim Watson and the CEO of the NCC, Melnyk then allegedly proposed that Trinity spend US$500 million to build the arena and rent it “to a Melnyk company” for $1 per year.

In reply, Trinity suggested CSMI withdraw from RendezVous LeBreton and become only a tenant of the arena – a proposal Melnyk “categorically rejected,” according to the statement of defence.

Melynk then allegedly came back with proposed terms for withdrawal, under which the City of Ottawa and Trinity would split the cost of the arena; the arena would be leased to CSMI for 30 years, rent-free; and CSMI would retain naming rights, royalties and branding rights.

In a statement on Tuesday evening, CSMI proposed a solution that it said “would allow the parties to move forward.” The sports company, again, proposed Trinity finance the hockey arena and in exchange, CSMI would give Trinity its interest in and all its profits from the mixed-use components of the project – and cover the arena’s operating and lifecycle costs for the duration of its lease.

In a brief statement released an hour later, Trinity said “it appears nothing has changed.”

“Our court filings today made clear that Mr. Melnyk and CSMI have been demanding a free arena courtesy of local taxpayers and Trinity,” the statement said. “Mr. Melnyk’s letter does little more than confirm that fact.”

Watson has said municipal tax dollars won’t be used to fund the hockey arena.

In addition to the $1 billion in damages, Trinity’s countersuit is seeking another $44 million from CSMI related to payments made on CSMI’s behalf and in funds spent by Trinity on the LeBreton Flats project so far.

900 Albert ‘complementary’ to LeBreton, Trinity argues

Once built, Trinity’s 900 Albert development will be a massive retail, residential and office complex consisting of three skyscrapers, the biggest of which will be 65 storeys and Ottawa’s tallest highrise. Ottawa city council approved the controversial development in July.

Melnyk’s lawsuit alleged Trinity pursued 900 Albert “in a manner that put the development of 900 Albert in direct competition” with LeBreton and then made changes to the development that would “destroy the viability” of LeBreton.

The lawsuit also claimed an independent study on the two projects commissioned by CSMI found that the Ottawa market couldn’t support both of them.

None of this is true, Trinity alleges in its statement of defence.

“900 Albert neither was nor is in conflict with LeBreton. Rather, it is complementary,” the statement of defence argues. “Ottawa’s real estate market can and will absorb both projects within a reasonable time.”

A rendering of three mixed-use skyscrapers to be built at 900 Albert St., approved by Ottawa city council in July. The tallest of the highrises will be 65 storeys.

City of Ottawa

Trinity claims CSMI knew about 900 Albert “from the outset” and that the three-tower complex was an “express part” of the letter outlining the terms under which RendezVous LeBreton would move forward, which both parties signed.

“CSMI even contracted to support it ‘without limitation,'” Trinity alleged in its statement. “It then signed the term sheet, waiving or being estopped from raising any objection.”

‘You can’t have 30 years of squabbling’

Days after Melnyk filed his suit, Watson told reporters he thinks it’s “highly unlikely” the Melnyk-Ruddy partnership could move forward with one party suing the other — an opinion he reiterated during a year-end interview with Global News on Monday.

“I’d be very surprised if it goes forward because you can’t have one partner suing another and this is very much a 30-year arrangement … you can’t have 30 years of squabbling,” said Watson, a non-voting member on the NCC’s board. “You have to either start the process over or see what you can do with the remnants of the existing partnership and move forward.

“I think if the partnership, (if) we determine that it’s not salvageable, I think we have to start over in fairness. I’m not sure if you can pick just one side or the other and move forward because if you do that, you’re going to be sued by one or the other sides. It’s not part of the partnership.”

“I have been actively involved in the redevelopment of the LeBreton Flats since 2014 because I know how important this redevelopment is to local residents and Canadians,” Ruddy wrote.

“The vision we’ve brought forward is the right one. I will work with the NCC, the City of Ottawa, and the community at large to advance solutions that will make this project a reality, and avoid losing these important lands for another generation.”